Home buying: Go with cold, clear logic

In this Wednesday, Sept. 18, 2013 photo, a for sale sign hangs in front of a house in Walpole, Mass. (Steven Senne/AP Photo)

Anyone looking for a strong shot of unvarnished reality need look no further than Patrick Bet-David. This California-based financial services adviser is to romantic notions — like home ownership and dating — what sunshine is to fog.

His outlook may be just what America needs.

“I was sold an American dream,” said Bet-David, who immigrated with his family from Iran in 1990. “What I saw as an immigrant was a place we could have freedom of religion, and run a business in a free market, with free enterprise.”

And today, at 34, Bet-David owns the PHP Agency, a financial services firm he founded four years ago that has 30 employees and 200 full-time independent contractors nationwide. Bet-David does very well.

He also rents his home.

“My employees come over and wonder, 'Why does our CEO rent his house?' ” he says.

Because he's following his own financial rules, that's why. One of those rules: Just because you have the money doesn't mean you should buy a house.

His wife of nearly five years knew early in their courtship that owning a home was not going to be part of the plan for a long time. That discovery occurred shortly after their second date.

“I've worked with thousands of families struggling to make house payments, which leads to arguments, all because they bought a house prematurely, and spent too much,” said Bet-David.

I thought I'd call Bet-David for a reality check because lately, I've been hankering to buy a home again. As a live-in home stager, I am not currently living in a home I own — a lifestyle that breaks with more than two decades of personal history.

However, I do own a home in another state, which I rent out, making me both landlord and tenant — as well as crazy.

“While I like having the flexibility of not being tied to a house,” I tell Bet-David, “being a tenant just isn't the same as owning. I want to paint my way, add built-ins and moldings, put up window treatments, plant a garden, have a dog, get to know the neighbors, nest.” He's heard it all before.

“What you're doing — owning a home you rent out and renting where you live — is perfect right now,” he tells me. “You get the benefits of a rising market, but can be nimble.”

“Perfect?” I'm not sure I heard right. That would be the first time anyone has ever used that word to describe my investment strategy.

“What you're doing has a lot to do with the phase of life you're in. Your kids are taking off. Your career is blooming. You're charting a new course.”

“You think I planned it this way?”

“You've built houses from the ground up. You've bought and sold. Been landlord and tenant. You know about the different phases and stages of life and houses. I want to teach other people to do what you've done,” he says.

I can't even talk for laughing.

“I work with a lot of millennials just getting started. They think buying a house is the next thing to do. But they saw what happened to their parents,” he says.

“My message isn't 'don't buy a home,' ” he says. “My message is, the American dream is not home ownership. The American dream is freedom.”

“I want both,” I said.

Bet-David is about to have both. In four months, he and his wife, and their two sons, ages 20 months and three weeks, are moving from their rental home in Woodland Hills, Calif., to a house they're buying in Dallas. (He chose Texas partly because it has no state income tax, so it's friendlier to business.)

But he still followed his own home-buying rules.

Smart home buying

Financial services adviser Patrick Bet-David's five rules:

1. Don't buy unless you have more than 12 months of house payments saved. He helped me with the math: Say, you buy a house for $350,000 and put 10 percent down. Depending on your loan, you will probably have a $315,000 mortgage, which will cost about $1,800 a month or $22,000 a year in mortgage payments. Add $3,000 for property taxes, and more for insurance and association fees, so you should have $25,000 to $30,000 in the bank after closing.

2. Don't buy if you're not going to live in the area for 10 years. Do your due diligence. (Bet-David has been considering the Dallas area for two years.) Consider your work, the community, nearby family, schools and neighborhood.

3. Don't buy if you're a newlywed. “Wait two years,” he said. “In addition to being a couple, you are business partners. It could take a while for you to learn how your partner manages finances. If one is spending out of control, you don't want to take on a mortgage. First learn how disciplined (the other is.)”

4. Don't buy too much house. Whatever price home you can afford, force yourself to go 10 to 20 percent cheaper. Brokers might try to persuade you to buy as much house as you can qualify for. Resist.

5. Don't buy a house to keep up with your friends. Even if you and your friends have the same household income, and they buy a house for a certain amount, you don't know whether their parents helped with the down payment; you don't know what their debt is or whether they're going to be overextended, he said. Deal with the cards you were dealt. Buy within your means, not someone else's.

Syndicated columnist and speaker Marni Jameson is the author of “House of Havoc” and “The House Always Wins” (Da Capo Press). Contact her throughmarnijameson.com.

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